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what the idiots don't know!jebidihead

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    For the benefit of tossers such as jebidihead:White House Aims to Cut Taxes Paid by Individuals on Corporate Dividends

    WASHINGTON -- The White House is leaning toward proposing a sharp reduction of taxes that individuals pay on corporate dividends -- a move that could boost both the economy and the stock market, Wednesday's Wall Street Journal reported.
    Reducing the federal tax bite on corporate dividends, long a goal of Republicans and their business allies, would make dividend-paying stocks more attractive to individual investors. The tax breaks are bound to be attacked by Democrats as a costly sop to wealthy elites. But advocates say dividend-tax reductions would spur business investment and improve the stability of U.S. corporations by encouraging them to issue stock rather than borrowing money.

    "In terms of bang for the buck [dividend-tax reduction] is really the biggest, " said White House economic adviser Glenn Hubbard. According to a White House study, eliminating the tax could boost economic activity enough to allow the government to recoup as much as 40% to 50% of the cost -- estimated at up to $25 billion a year -- through increased tax payments. Mr. Hubbard and some other ecomonists also argue that the proposal could boost overall stock prices by 20%.

    Many business economists have argued that dividends are effectively taxed twice. Companies pay out dividends from the cash left after paying taxes on earnings; shareholders then must pay income tax on the dividends they get. By contrast, corporations can deduct payments on debt. So interest payments are taxed only when the holders of a company's debt report it as income -- for instance, as interest payments on corporate bonds.

    The White House now is finalizing the package of tax proposals it intends to introduce by early next year. Business groups have been pushing the administration to slash corporate dividend taxes and to accelerate the date that other tax cuts take effect. Both proposals have become administration favorites. But a proposal by the Business Roundtable and some leading Democrats to suspend payroll taxes for the coming year has thus far been rejected, although it could re-emerge as part of a negotiated tax deal with congressional Democrats. Administration officials emphasize that President Bush hasn't yet approved a final package.

    Wall Street Journal Staff Reporter John D. McKinnon contributed to this report.

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